Welcome to the Paragon resources hub
Here you’ll find a collection of useful materials on the techniques and considerations when it comes to developing, implementing, using and managing credit risk models, as well as the latest Paragon opinion and industry developments.
The EU AI Act: Implications for Lenders and Credit Scoring Models
The EU Act for AI, also known as the AI Act, is a comprehensive regulatory framework proposed by the European Union to ensure the safe and ethical use of artificial intelligence (AI). Credit scoring models are likely to be classified as high-risk due to their significant impact on individuals’ access to financial services and economic opportunities. This classification brings about several regulatory requirements within the Act. These high-risk AI systems must meet specific criteria and adhere to strict regulatory standards.
Building a Robust Model Risk Management Culture: Overcoming Common Challenges
Model Risk Management (MRM) plays a pivotal role in safeguarding an organization's decision-making processes and ensuring the reliability of financial models. However, many businesses face substantial challenges in establishing a strong and adequate MRM culture. Recently, at the Credit Scoring and Credit Control conference in Edinburgh, Dan Hensel from 4most and I discussed the vital aspects of Model Risk Management and how to foster a robust MRM culture within an organization. In this article, I'll summarize our insights and share common hurdles organizations encounter on this journey.
Blame the Process, Not the Person: Enhancing Model Risk Management in Banks
“Don’t blame the person, blame the process.” I always remember hearing this said by the leader of the first analytics team I worked for in the late 1990s. Looking back now, this manager was instilling better model risk management before the discipline had been defined. Errors, mistakes and oversights can happen throughout the model lifecycle stages, but with strong process can be reduced and minimised. Ultimately this is the backbone of better Model Risk Management (MRM) practices.
Using technology to help meet model risk management requirements
Technology has a key role to play in advancing the model risk management frameworks and capabilities within Banks and Building Societies, and help meet SS1/23 regulations. As firms are using more and more models to automate insights, actions and decisions there is a need to efficiently and effectively manage those models, which is now being demanded by the PRA. This is paramount given the limited resources available with the required skills and expertise in this specialised and sort after area. The increase in regulatory expectations in combination with the explosion in the number of models being developed and used is having a multiplicative effect on model risk management workloads.
Paragon: the credit expert’s choice
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CARLIEN KRUGER, SENIOR MODELLER, WESTPAC
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